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FDIC advises investors in failed banks or thrifts

WASHINGTON (7/6/09)--The Federal Deposit Insurance Corporation (FDIC) on Thursday published its Proposed Statement of Policy on Qualifications for Failed Bank Acquisitions. The new policy statement would advise private capital investors that wish to acquire or invest in failed banks or thrifts on the “terms and conditions of the investments or acquisitions,” according to a release. If the policies outlined in the statement came to pass, the FDIC would “establish standards for bidder eligibility in connection with the resolution of failed insured depository institutions.” FDIC Chair Sheila Bair said the agency is “particularly concerned with the owners’ ability to support depository institutions with adequate capital and management expertise.” This policy statement should provide the necessary safeguards, Bair added. Under the rules set forth in the policy statement, the acquired depository institution must be capitalized at a Tier 1 leverage ratio (15%). The leverage ratio must be maintained for three years. However, some of the safety and soundness considerations can be “satisfied with a lower, but a still high level, of Tier 1 capital.” While the FDIC is seeking comment on all aspects of the proposal, the agency particularly requested outside input on “the appropriate level of initial capital” needed to satisfy safety-and-soundness concerns and general economic concerns. Comments are due within 30 days of the statement’s publication in the Federal Register. For the full FDIC release, use the resource link.